EasyJet Reports H1 2021 Loss in Line With Guidance and Lowers Q3 Capacity Outlook

No-moat EasyJet reported a headline loss before tax for first-half 2021 of GBP 701 million, in line with expectations, and showed an improvement in second-quarter profitability to a loss of GBP 278 million, from a loss of GBP 423 million in first-quarter 2021, despite lower revenue and passenger numbers. Cash burn of GBP 469 million in the second quarter has also improved, from the GBP 969 cash burn in the first quarter, largely due to lower working capital outflows. The firm ended the first half with GBP 2.9 billion liquidity, which we believe is sufficient to see the group through the recovery as cash outflows are reduced in line with increased traffic, as the U.K. and European Union roll out their respective vaccination programs and start easing travel restrictions over summer. Despite low visibility and high uncertainty, we remain confident the group’s focus on consolidating its positions at key hubs, coupled with the improvement in its relative cost position, could see it emerge from the crisis in a strong position with structurally higher profitability. We make no changes to our GBX 1,090 fair value estimate and believe shares are not offering a sufficient margin of safety to offset the very high uncertainty.